Worldwide Tax News
China Expands Tax Concessions for Advanced Technology Service Enterprises
China's State Administration of Taxation has published Circular 79 of 2017 on the expansion of the tax concessions for advanced technology service enterprises. Originally only available for enterprises established in one of 21 model cities and subsequently expanded to 31 cities, the tax concessions are now available for qualifying enterprises nationwide. This includes two main tax concessions:
- A reduced corporate tax rate of 15% (standard rate 25%); and
- An increased deduction cap for employee education expenses equal to 8% of total salaries (standard 2.5%), with any excess allowed to be carried forward.
In order to qualify, an enterprise must seek approval from their local competent authorities and meet the following conditions:
- Must be incorporated in China (excluding Hong Kong and Macau);
- Must have adopted advanced technology or have strong R&D capability to engage in one or more advanced technology-based service businesses, including information technology outsourcing (ITO), business process outsourcing (BPO), and knowledge process outsourcing (KPO);
- At least 50% of the total number of employees of the enterprise must be college educated;
- The income from engaging in advanced technology-based service businesses must account for more than 50% of total revenue; and
- The income from engaging in offshore service outsourcing business must account for at least 35% of total revenue.
The nationwide expansion of the tax concessions is effective as of 1 January 2017
El Salvador Ministry of Finance Announces Tax Amnesty Program
El Salvador's Ministry of Finance has announced the entry into force of a tax amnesty program that is available for a period of 90 days beginning 27 October 2017. Under the program, taxpayers with outstanding tax debts prior to the program's entry into force are allowed to regularize their situations without incurring any interest, surcharges, or penalties. The amnesty is available in respect of taxes administered by the General Directorate of Internal Taxes and the General Directorate of Customs.
Click the following link for additional information for taxpayer's that wish to benefit from the amnesty.
Ukraine Clarifies VAT Treatment of Data Processing and Other Information Services Provided by a Non-Resident
The Ukraine State Fiscal Service has recently published an individual tax consultation on the value added tax (VAT) treatment of data processing and other information services provided by a non-resident not registered for VAT. The consultation notes that in accordance with Article 180 of the Tax Code, Ukrainian recipients are responsible for collecting and remitting VAT on services provided by non-residents not registered for VAT if the place of supply is deemed to be within the customs territory of Ukraine. For this purpose, the consultation references Sections 186.2 - 186.4 of Article 186 of the Tax Code, which specifies the types of services deemed to be supplied in Ukraine if supplied to a Ukraine resident. In particular, the consultation references subparagraph c of Section 186.3, which includes, among others, the development, delivery, and testing of software; data processing and consulting; and information and other services in the field of information (IT), including the use of computer systems. Given that the services fall within the scope of services specified in Section 186.3, the recipient must collect and remit the VAT due. Where the recipient is also not registered, a VAT return is made only for the reporting period in which the service was received.
U.S. Social Security Fact Sheet for 2018 Published
The U.S. Social Security Administration has published a fact sheet for the 2018 Social Security rates and cap. For both employers and employees, the rate for the Social Security portion (OASDI) remains 6.20%, and the rate for the Medicare portion remains 1.45%. For the self-employed, the OASDI rate remains 12.4% and the Medicare rate remains 2.9%. The taxable earnings cap for OASDI is increased from USD 127,200 to USD 128,700. No cap applies for Medicare.
Click the following link for the 2018 Social Security fact sheet.
New Zealand Reinstates Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill
New Zealand Inland Revenue has announced the reinstatement of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill
On Wednesday 8 November 2017 Parliament reinstated the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill. The Finance and Expenditure Committee will now continue its consideration of the Bill. The Bill, introduced on 6 April 2017, contains measures relating to collecting employment and investment income information, reforms to the taxation of employee share schemes and sets the annual tax rates for 2017–18.
The Income-Sharing Tax Credit Bill introduced in August 2010 was not reinstated.
TIEA between Argentina and the U.S. has Entered into Force
The tax information exchange agreement between Argentina and the U.S. entered into force on 13 November 2017. The agreement, signed 23 December 2016, is the first of its kind between the two countries. It applies for requests made on or after the date of its entry into force concerning information for taxes relating to taxable periods beginning on or after 1 January 2018 or, where there is no taxable period, for all charges to tax arising on or after 1 January 2018.
Brazil Approves Pending Protocol to Tax Treaty with Argentina
Brazil's Chamber of Deputies has announced that the Committee on Foreign Relations and National Defense has approved for ratification the pending protocol to the 1980 income tax treaty between Argentina. The protocol, signed 21 July 2017 (previous coverage), is the first to amend the treaty. It will enter into force 30 days after the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force.
Tax Treaty between Canada and Ethiopia under Negotiation
According to recent reports, negotiations for an income tax treaty between Canada and Ethiopia are underway. Any resulting treaty would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.
CbC Exchange MoU between Hong Kong and South Africa Signed
According to an update from the South African Revenue Service, a Memorandum of Understanding on the exchange of Country-by-Country (CbC) Reports has been signed with Hong Kong. The MoU provides that CbC reports voluntarily filed by Hong Kong MNE groups in Hong Kong for the 2016 and 2017 fiscal years will be exchanged with South Africa, and given that exchange, South Africa will not require local filing of CbC reports in South Africa by such MNE groups.
Note - As per the Hong Kong Inland Revenue's CbC reporting guidance page (and OECD guidance), the voluntary filing of CbC reports in Hong Kong will only serve to relieve local filing obligations in other jurisdictions with respect to the 2016 reporting fiscal year if the required legal framework is put in place in Hong Kong by 31 December 2017 (generally the first CbC report deadline in other jurisdictions). The passage of the relevant legislative amendment to the Inland Revenue Ordinance is pending.
Panama to Sign Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS
According to recent reports, Panama has formally expressed its intent to sign the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI). Following Panama's signature of the MLI and deposit of its ratification instrument, the MLI will apply to Panama's covered agreements (notified tax treaties), provided that a particular agreement has also been notified as covered by the respective counterparty, and such counterparty has also deposited its MLI ratification instrument.
Qatar Signs Mutual Assistance Convention
The OECD has announced that on 10 November 2017, Qatar signed the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol. The Convention must now be ratified by Qatar and the ratification instrument deposited before entering into force in the country.
Click the following link for the signatories to the Mutual Assistance Convention to date.
At the same time, Qatar also signed the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information, which provides for the exchange of information under the OECD Common Reporting Standard (CRS). Qatar intends to begin the first exchanges by September 2018.
SSA between Serbia the U.S. under Negotiation
The Serbian Ministry of Labour, Employment, Veteran and Social Affairs has announced that officials from Serbia and the U.S. met 9 November 2017 to discuss bilateral cooperation, including the negotiation of a social security agreement. Any resulting agreement would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.